Lewis Company’s standard labor cost of producing one unit of Product DD is 3.40
ID: 2453693 • Letter: L
Question
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.40 hours at the rate of $14.00 per hour. During August, 42,400 hours of labor are incurred at a cost of $14.11 per hour to produce 12,300 units of Product DD.
(a) Compute the total labor variance.
Total labor variance
$
Favorable, Unfavorable, or Neither Favorable or Unfavorable?
(b) Compute the labor price and quantity variances.
Labor price variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Labor quantity variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
(c) Compute the labor price and quantity variances, assuming the standard is 3.73 hours of direct labor at $14.29 per hour.
Labor price variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Labor quantity variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.40 hours at the rate of $14.00 per hour. During August, 42,400 hours of labor are incurred at a cost of $14.11 per hour to produce 12,300 units of Product DD.
(a) Compute the total labor variance.
Total labor variance
$
Favorable, Unfavorable, or Neither Favorable or Unfavorable?
(b) Compute the labor price and quantity variances.
Labor price variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Labor quantity variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
(c) Compute the labor price and quantity variances, assuming the standard is 3.73 hours of direct labor at $14.29 per hour.
Labor price variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Labor quantity variance
$ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Explanation / Answer
a)Total labor variance = AH *SR - SH*SR
= 42400*14.11 - (12300*3.4)*14
= 598264 - 585480
=$ 12784 (U)
B)Labor price variance = AH *AR - AH *SR
= 42400 * 14.11 - 42400* 14
= 598264 - 593600
= 4664 (U)
Labor efficiency variance = SR * AH - SR *SH
= 14 * 42400 - 14 * (12300*3.4)
= 593600 - 585480
= 8120 (u)
C)Labor price variance = AH*AR -AH*SR
= 42400 * 14.11 - 42400 *14.29
= 598264 - 605896
= - 7632 (F)
Labor quantity variance = SR *AH - SR*SH
= 14.29 * 42400 - 14.29 *(12300*3.73)
= 605896 - 655610.91
= -49714.91 (F)
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